Crowdfunding provides alternate business funding method

There are many different matters that an entrepreneur needs to address when starting a business in Chicago or beyond. One of the most important in small business formation is financing. While there are of course several different ways in which this can be secured, the most common approach is likely a bank loan. The state of the economy over the past few years does not make this option a sure thing however, and entrepreneurs may find themselves looking for alternate methods for funding.

A method gaining popularity in this online era is crowdfunding. This is in part accomplished by soliciting online for financial support. Anyone interested in providing funding is directed to a crowdfunding website.

Though accredited investors are currently the only ones who can provide financing, this will be changing soon. A law that was recently passed will make it possible for anyone to purchase stock from a startup company via the method. This is great news for the small businesses throughout the nation since they will be able to bring in funding from individuals without the expense of filing a public stock option. Over the course of a year, struggling businesses will be able to raise up to $1 million from a total of 10,000 individuals. Regulators are expected to approve the law soon.

The new law is expected to increase the number of startup businesses that otherwise would not get beyond the dreaming stage. Whether this will come to fruition remains to be seen. What do you think about crowdfunding? Would you be willing to invest in a startup business via this method?

Source: ABS CBN News, "Need money for a start-up? Try crowdfunding," Agence France-Presse, June 27, 2012

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